Israeli cybersecurity company Check Point Software Technologies Ltd. (Nasdaq: CHKP) new CEO Zadav Zafrir took his first major decision this week in forming a strategic partnershipNwith Israeli cloud security company Wiz led by Assaf Rappaport.
Wiz, which is Israel's fastest growing company and has raised more money than any other, makes Check Point look jaded and old-fashioned. This makes the collaboration a significant boost for Check Point, which has been growing and profitable for over 30 years, but is very cautious and conservative. From now on, its extensive customer base will be able to have swift and easy access to one of the best cloud security products on offer, certainly in Israel, although this is done at the expense of Check Point's internal activity based on the $175 million acquisition of Dome9 in 2018.
For Zafrir, this is not just another cooperation agreement. Check Point has such agreements with other companies including CyberArk, Aramis and Radware, but in this instance, it is an agreement that it defines as strategic, including not only mutual marketing and distribution, but also product and marketing interfaces and special pricing packages, which encourage each company's customers to prefer the other's solution over rival solutions.
The competitor in common
The two companies complement each other in the market. Check Point is dominant in a system for protecting against attacks on the corporate network (firewalls), while Wiz is one of the largest cloud infrastructure security companies in the world. Both have many collaborations, but not with Nir Zuk and the Palo Alto Networks cybersecurity company that he founded. With the new partnership, both will try to compete with the marketing machine of Palo Alto Networks, which offers a suite of competitive products at affordable prices, and blocks many markets for them.
Despite yesterday's dramatic announcement, the market has been far from excited. Check Point's stock rose 1.5% yesterday, while its rival Palo Alto Networks, which it has in common with Wiz, barely budged. The market seems to have priced in Nadav Zafrir's appointment in the days following the announcement.
The strategic partnership announcement received little media coverage, and even Wiz ignored it. Wiz's media and advertising channels make no mention of the deal, nor does it appear on its homepage, where Wiz only presents solutions that compete with Check Point, such as those from companies like Fortinet and Netskope. It says it is currently working on deep integration with Check Point, and the product launch will follow.
Oppenheimer senior equity analyst Sergey Vastchenok says about the market's indifference, "Integration like this can take years, it is not a matter of a month or two. Our recommendation for Check Point stock is neutral, as growth at Check Point is slow. No one expected Zafrir to make moves that are too dramatic at first. He is learning the field and stresses that his breakthrough in Check Point's platform will be in the field of artificial intelligence."
"Not the right message"
How much room for revolution is there at Check Point, which excels in profitability and a gradual increase in its share price, but does not make large, loss-making investments to acquire market share in the future? A senior manager who is familiar with the organizational culture at Check Point says, "There is a tradition at the company in which Gil Shwed, the CEO until recently, gives the new senior managers one dramatic decision, one that he may even disagree with, and after that their degree of freedom declines.
"Shwed is no longer the CEO, he has become the chairman, and it will be interesting to see whether this culture will change under Zafrir.
"If the goal was to restore Check Point, which was once one of the five largest cybersecurity companies in the world, to its greatness, then the new message of the agreement with Wiz is not the right message, because Check Point is giving up some of its activities, where it cannot win.
"The expectation was that Zafrir would make a more significant move, one that would echo the moves of Nir Zuk and Nikash Arora at Palo Alto Networks: making significant acquisitions, establishing several product divisions and managing strengths separately from each other."
Not wanting to be left behind
ANEK Capital managing partner Orel Levy says, "Zafrir sees where the world is going and he doesn't want to get left behind with Check Point and he needs access to products and new content areas in the cloud world, where there is most of the growth in cybersecurity. "Investors thought that Shwed was a conservative CEO, who preferred to maintain high margins and not invest in growth as Nikesh Arora, CEO of Palo Alto, did - even though Shwed is a world-class cybersecurity pioneer. Zafrir is a man of the new world. He knows the new companies. "But did the market overestimate expectations? We will know this in the coming quarters, although it usually takes a new CEO between five months and a year to make such a move. In the first stage, Check Point simply preferred not to lose customers."
Another senior executive in the cybersecurity investment industry, who knows Check Point well, says, "Shwed was seen as a 'loner' manager who tended to disparage young rivals, while Zafrir is seen as a man very connected to the ecosystem of companies through the investments he made and the boards of directors on which he sat."
Another executive adds, "In the past, Shwed could have acquired a major competitor like Fortinet, with the cash he had and the company's large size.
"Today, even with a large cash pile, the high valuations of cybersecurity companies make it difficult for him to make significant acquisitions."
Published by Globes, Israel business news - en.globes.co.il - on February 12, 2025.
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